How Jaitley plans to counter inflation

How Jaitley plans to counter inflation

Committing to break the vicious cycle of high inflation and high interest rate, Finance Minister Arun Jaitley on Monday made a case for putting in place strict measures and special courts to stop hoarding and black marketing, in addition to reviewing the commodity laws.

"Long inflationary trends have adversely impacted the food and nutritional security of the common man.

“We are committed to breaking this vicious cycle of high inflation and high interest rates," he said during a pre-Budget meeting with state finance ministers.

He further said that slowdown in economic growth coupled with high inflationary pressure poses a challenge to the country's economy, which has crawled at sub 5 per cent in the recent years.

How Jaitley plans to counter inflation

He said the need for a Single Agriculture Market and real time information dissemination on prices to farmers and consumers are areas which need to be addressed.

As part of the economic integration, he further said Goods and Services Tax is one pending issue, on which now consensus needs to be built and "implementation done at an early date".

"Implementation of GST has the potential to significantly improve the growth story. . . there are some vexatious issues which only need resolution. I wish and hope that these will be sorted out sooner than later," he said.

Earlier in the day, President Pranab Mukherjee said curbing food inflation was topmost priority of the Narendra Modi-led government at the Centre.

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Image: Arun Jaitley is administered oath of office by President Pranab Mukherjee (unseen) as a Cabinet minister at the Rashtrapati Bhavan in New Delhi May 26, 2014.Photographs: Adnan Abidi/Reuters

How Jaitley plans to counter inflation

Jaitley, who is holding pre-Budget meetings with different stake holders, said it is the policy of the new government that ‘Team India’ will not be limited to the government sitting in Delhi but will also include states as equal partners in the growth.

"Discussions held today will be of immense help to the government in giving contours to the Budget proposals to be presented before the Parliament," he said.

Referring to recent data, he said the manufacturing sector has had an abysmal performance last year and the investment cycle has been disturbed.

"The negative sentiment has affected trade, hotels and transportation sectors which are posed for a slower growth compared to last year," Jaitley said.

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Image: A vendor sells vegetables at a market in Mumbai.Photographs: Rupak De Chowdhuri/Reuters

How Jaitley plans to counter inflation

The slow-down in economic growth coupled with high inflationary pressure, he said poses a challenge to the macroeconomic environment.

He said tax collections are only at 10 per cent of the gross domestic product compared to the initial budget estimates of 10.9 per cent.

"India can ill afford this trend and I believe that deliberation held today will be the first of the series of such deliberations and we will together steer the economy in the mutually agreed direction," he added.

Jaitley further said his government is committed to evolving a model of National Development which is driven by the States and "we intend to extend necessary flexibility to States in achieving this. I urge the States to be fiscally responsible with this greater devolution of power".

How Jaitley plans to counter inflation

He further said India has now reached a stage where demographic dividend will be bereft of any meaning unless "we improve access and quality of education and health services for teeming masses".

"We believe that not only access but there has to be a quantum jump in the quality of education and health services at affordable costs.

“I seek your support in achieving the objective of, quality education for all and assurance of healthcare for all," he said.

On centrally sponsored schemes, Jaitley said that with a view to grant greater autonomy to States in scheme implementation it was decided that funds for such schemes will be routed through the state governments.

"Flexifunds" as part of this decision also exist to tailor the scheme implementation to meet the local requirements.

"I urge all of you to use this forum for making suggestions for improving implementation of various welfare programmes of the government," Jaitley said.